2005 Annual Report - Banque PSA Finance

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emeasurement at fair value of the hedged portion of the loans are recognized in profit or loss (see note C.1.1. Derivative instruments – recognition and measurement). C.6.3. Impairment losses Impairment losses on finance receivables are deducted from their carrying value in the balance sheet, as soon as a loss event occurs. Impairment losses are identified separately under specific line items. Retail financing impairment losses: - An impairment loss is recognized on sound loans when the borrower defaults on a single installment (loss event). Impairment is assessed based on the probability of the outstanding loan being classified as non-performing and on the discounted average loss rate. - Impairment losses on non-performing loans: - Banque PSA Finance has set up a database containing historical collection data for non-performing loans (defined as loans with at least one installment more than 90 days past due). These data are used to determine the discounted average loss rate, which serves as the basis for calculating impairment losses on non-performing and doubtful loans. The discounted average loss rate is calculated using the effective interest method. Wholesale financing impairment losses For wholesale finance receivables, impairment losses for known credit risks are determined on a case-by-case basis. When a finance receivable is considered as irrecoverable, it is written off through profit or loss. The previously-recognized impairment loss is also reversed through profit or loss. Any subsequent recoveries are credited to the income statement under “Cost of risk”. C.7. Financing liabilities Upon initial recognition, financing liabilities are measured at the amount of the net proceeds received. Their carrying amount therefore comprises the outstanding principal and accrued interest, plus: - debt issuance and set-up costs, - issue or redemption premiums, if any. Interest expense is allocated by the effective interest method, with the effective interest rate being the rate that exactly discounts estimated future cash outflows through the expected life of the debt. 38 Banque PSA Finance - 2005 annual report CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements C.7.1. Hedges of interest rate risks on financing liabilities Financing liabilities hedged by interest rate swaps are remeasured at fair value in accordance with hedge accounting principles applicable to fair value hedges. Gains and losses arising from remeasurement at fair value of the hedged portion of the liability are recognized in profit or loss and are offset by the effective portion of changes in the fair value of the swaps (see note C.1.1. Derivative instruments – recognition and measurement). C.7.2. Debt securities Debt securities include certificates of deposit, bonds, interbank instruments and money market securities, other than subordinated securities which are reported under “Subordinated debt”. � D. PENSION OBLIGATIONS In addition to standard pensions payable under local legislation, Group employees receive supplementary pension benefits and retirement bonuses. These benefits are paid under defined contribution and defined benefit plans. The payments made under defined contribution plans are in full discharge of the Group’s liability and are recognized as an expense. In accordance with IAS 19 – Employee Benefits, obligations under defined benefit plans are measured by independent actuaries using the projected unit credit method. This method sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation, which is then discounted to present value. The calculations mainly take into account: - an assumed retirement age, generally 60 for employees in France or over-60 for employees who, by the time of their 60th birthday, have not contributed over a sufficiently long period to be entitled to a full pension under the governmentsponsored scheme; - a discount rate; - an inflation rate; - assumptions concerning future salary levels and staff turnover rates. Actuarial valuations are performed every year for the main plans, and once every three years for the other plans, with more frequent valuations conducted if necessary to take account of changes in actuarial assumptions.
Changes in actuarial assumptions and experience adjustments – corresponding to the effects of differences between the previous actuarial assumptions and what has actually occurred – give rise to actuarial gains and losses. These gains and losses are recognized in the income statement by the corridor method, which consists of recognizing a specified portion of the net cumulative actuarial gains and losses that exceed the greater of 10% of the present value of the defined benefit obligation (before deducting plan assets) and 10% of the fair value of any plan assets. In accordance with IFRS 1 – First-time Adoption of International Financial Reporting Standards, all cumulative actuarial gains and losses at January 1, 2004 have been recognized in the balance sheet and the corresponding adjustment has been recorded in equity. The total projected benefit obligation, including the portion not recognized due to the deferral of actuarial gains and losses, is covered by external funds. Because of the deferral of actuarial gains and losses, in some cases the amount of these external funds exceeds the recognized projected benefit CONSOLIDATED FINANCIAL STATEMENTS Notes to the consolidated financial statements obligation, leading to the recognition of an asset in “Other non-current assets” in an amount not exceeding the sum of net actuarial losses and unrecognized past service costs. Other employee benefits covered by provisions concern, for the French subsidiaries: - long-service awards, - the remaining liability towards the “Caisse de Retraite du Personnel Bancaire”, pension fund for banking sector employees. � E. OTHER COMMITMENTS In accordance with IAS 39, irrevocable commitments given or received by Group companies are recognized in the balance sheet at their historical fair value (option premiums, cash balances on swaps, mostly at par). Provisions are taken for impairment of financing or guarantee commitments in accordance with IAS 37 – Provisions, Contingent Liabilities and Contigent Assets. Other commitments comprise derivative financial instruments (see C.1.). NOTE 3 – CASH, CENTRAL BANKS, POST OFFICE BANKS (in millions of euros) 31/12/2005 Dec. 31, 2005 Dec. 31, 2004 Cash 1 1 Central banks and post office banks (deposits) 9 20 - of which compulsory reserves deposited with the “Banque de France” 4 2 Total 10 21 Banque PSA Finance - 2005 annual report 39
Page 1 and 2: www.banquepsafinance.com 2005 Annua
Page 3 and 4: Banque PSA Finance, a wholly-owned
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Page 9 and 10: from 29.8% in 2004. This confirmed
Page 11 and 12: A dynamic marketing strategy In 200
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Page 17 and 18: � MATURITIES At December 31, 2005
Page 19 and 20: CREDIT RISK MANAGEMENT Cost of risk
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Page 23 and 24: BANQUE PSA FINANCE IN 2005 In 2005,
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Page 31 and 32: CONSOLIDATED FINANCIAL STATEMENTS C
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Page 37 and 38: No provision has been made for defe
Page 39: C.2. Financial assets at fair value
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Page 49 and 50: ANALYSIS OF DEMAND AND TIME ACCOUNT
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Page 53 and 54: ASSUMPTIONS CONSOLIDATED FINANCIAL
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Page 57 and 58: CONSOLIDATED FINANCIAL STATEMENTS N
Page 59 and 60: ANALYSIS OF RETAIL FINANCING REVENU
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Page 65 and 66: NOTE 31 - COST OF RISK � 31.1. CH
Page 67 and 68: BANQUE PSA FINANCE TAX PROOF (in mi
Page 69 and 70: NOTES Banque PSA Finance - 2005 ann
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2005 Annual Report - Banque PSA Finance

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